The United States Securities and Exchange Commission approved the conversion of the Bitwise 10 Crypto Index Fund into an ETF this Tuesday. But soon after, the SEC suspended the approval, suspending the process and creating confusion among the players in the market.
This unexpected reorganization affected Bitwise’s fund listed on the ticker symbol BITW and provided exposure to Ethereum and Bitcoin. The fund had submitted the request for conversion in November in anticipation of profiting from the popularity among mainstream ETF investors.
Sherry Haywood, assistant secretary at the SEC, issued a letter on the same day, suspending the approval until the commission decides on the case again. The eleventh-hour twist has raised questions, with analysts pointing out lack of crypto-exclusive guidelines or political interference.
Earlier approval had been given under the delegated authority of the SEC by the Division of Trading and Markets. Experts like James Seyffart noted that the approval was likely halted by one or more commissioners who exercised the powers in their discretion.
He added the earlier-than-expected decision means Bitwise now has to wait for affirmation or reversal. NovaDius Wealth Management’s Nate Geraci described the scenario as reminiscent of the delayed ruling on the Grayscale ETF from earlier in the month.
SEC may change Crypto ETF rules
Grayscale’s Digital Large Cap ETF saw a similar path approved on July 1 and suspended the next day for re-consideration. Scott Johnsson from Van Buren Capital suggested internal politicking as the reason for the hold within the SEC’s senior leadership.
He suggested the chairman, Paul Atkins, might be trying to go round the 240-day rule in a bid to finish ETF rulings. Johnsson is also sure the delay was meant to prevent Democrat commissioner Caroline Crenshaw from intervening in the process.
ETF analyst Eric Balchunas observed the SEC could wait until there are official listing rules for crypto ETFs. The rules could emerge by October and potentially make the process simpler while removing confusion on a case-by-case basis.
The SEC has only postponed the July 17 vote on in-kind redemptions for Bitwise’s spot Bitcoin and Ether ETFs. Meanwhile, financial reporters such as Eleanor Terrett reported efforts at simplifying ETF approvals for digital currencies.
This would help issuers automate some steps and escape regulatory logjams like the cumbersome 19b-4 filing procedure.
